Senate Democratic leaders on Thursday said “preliminary discussions” have begun about pressing federal economic officials for their strategy on managing the Wall Street companies they have taken over, as well as more future accountability after the current fiscal crisis.
At their weekly press conference, Majority Leader Harry Reid (D-Nev.) and Sen. Charles Schumer (D-N.Y.) both expressed worry that the Federal Reserve and the Treasury Department don’t have a long-term strategy for how to manage firms like Bear Stearns, Freddie Mae and Freddie Mac and AIG, all of which have been bailed out this year by the Bush administration.
Without a plan, the two leaders said the U.S.’s federal banking system may be overwhelmed.
“Both the Federal Reserve and the Treasury are realizing we need a more comprehensive solution. I’ve been talking to them about it, and I may be throwing out some ideas,” Schumer said. “The worry is that the Federal Reserve has too much to do right now… It’s hard for them to do monetary policy, which is their primary task, and then run all of these companies. There are some preliminary discussions about how to sort of encapsulate and separate the two, both to keep focus on monetary policy by the main Fed leaders but also to prevent conflicts of interest.”
Reid also called on Federal Reserve Chairman Ben Bernanke to be more transparent and accountable. The Nevada senator has suggested several times this week that Bernanke and Treasury Secretary Hank Paulson could have done more to keep congressional leaders appraised of the impending bailouts. However, Reid has also complimented both men, and emphasized to reporters that they are relatively new on the job.
Bernanke assumed the chairmanship in February 2006, while Paulson took over the Treasury Department that July.
The Federal Reserve “is a very big and powerful organization, and there’s been far too much done, especially in the past few months,”
Reid said. “The American people have no idea what’s going on.”
If diplomacy fails, Reid didn’t shut the door on the possibility of legislation to curb the Federal Reserve’s power or bring more transparency.
“That will have to come later,” he said. “We’ll have to see.”
–J. Taylor Rushing